Consumer spending is a major component of GDP and, to assist in its analysis, the Office for National Statistics has just produced an analysis of spending within regions across the UK. The data was collected using two surveys – the Living Costs and Food Survey (also used as the basis of the Consumer Price Index) and the Annual Business Survey which records sales of businesses. The former looks at 5,000 households (not a particularly large number when broken down into regions) which are interviewed and keep a diary of their expenditure for a two-week period; the latter records retail sales of 80,000 businesses, so provides a larger sample, but suffers in accuracy because some sales go to businesses, not consumers.
The data is broken down into twelve categories which are in turn subdivided into narrower classifications. The twelve categories are food and soft drinks, alcohol and tobacco (and narcotics), clothing and footwear, household goods and services, housing, health, transport, communications, recreation and culture, education, restaurants and hotels, and a miscellaneous category covering items not included in previous sections. The data is also split down into nine English regions, Scotland, Northern Ireland and Wales.
The average spending per person in 2016 in the UK was £18,787 and, not surprisingly because of high incomes and high housing costs, London had the highest national expenditure (£24,545), while the lowest spending was in the West Midlands (£15,276) and Wales (£15,965). The region with the highest growth between 2015 and 2016 was the North East (8.1%) while the lowest growth was in Northern Ireland (- 0.4%), the only area to see a fall in spending per person in this period.
The survey also provided information about the levels of savings across the country with an average savings ratio (savings out of disposable income) of 6.9%. The ratio was highest in London (14.5%) while the lowest levels occurred in the South West, (1.5%).
The ONS looked at the breakdown of spending between the different categories. London stood out, with 42% of spending going on housing, compared to the UK average of 27%. As a result, it spent proportionately less in the other categories. Excluding London, there is relatively little variation between the regions although, proportionately, spending on tobacco in Northern Ireland is high, spending on food and clothing in Yorkshire is lower than in other regions and spending on recreation and culture in London is the lowest of all areas. The UK averages were: Food 10%, Alcohol and tobacco 4%; Clothing and footwear 5%; Housing 27%; Household goods and services 5%; Health 2%; Transport 13%; Communications 2%; Recreation and culture 10%; Education 1%; Restaurants and hotels 10%; Miscellaneous 13%.
Since 2014, among the sub-categories are drugs and prostitution and their inclusion has added about £10billion to the UK’s GDP. However, because these activities are traded in the shadow or hidden economy and the suppliers do not disclose their earnings to the tax authorities, the ONS has warned that the accuracy of these two categories is low. Nevertheless, it was still able to suggest that more is spent on prostitution than on gardening and DIY activities.